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Behavioral Finance Foundation - Coggle Diagram
Behavioral Finance Foundation
Behavioral Basics
Why bad economic & investment decisions ?
Limited capacity
for
complex information
(US & international stocks)
Reliance on
rules of thumb
vs.
case specific analysis
Overweigh the story
vs. the
numbers
(blockchain, dot com)
Underestimate important influences
(sentiment, news)
Overconfidence
Rational decision-making
Singular vs Case Data
Case Data
Anecdotal (based on stories)
Base Rate Data
Numerical
70% of IPOs are lower in price after 12 months
Too often we don't give enough weight to the number
Estimating probabilities of outcomes
Risk-neutral pricing
Risk aversion & investing
Call options & skewness
Put options & risk aversion
The VIX
Behavioral Finance & Investing
Stock Market Anomalies
Behavioral Investing Strategies